There May Be Reason For Hope In Yuasa Trading's (TSE:8074) Disappointing Earnings

Soft earnings didn't appear to concern Yuasa Trading Co., Ltd.'s (TSE:8074) shareholders over the last week. We did some digging, and we believe the earnings are stronger than they seem.

Check out our latest analysis for Yuasa Trading

The Impact Of Unusual Items On Profit

To properly understand Yuasa Trading's profit results, we need to consider the JP¥2.3b expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect Yuasa Trading to produce a higher profit next year, all else being equal.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Yuasa Trading.

Our Take On Yuasa Trading's Profit Performance

Because unusual items detracted from Yuasa Trading's earnings over the last year, you could argue that we can expect an improved result in the current quarter. Based on this observation, we consider it likely that Yuasa Trading's statutory profit actually understates its earnings potential! And the EPS is up 42% annually, over the last three years. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 2 warning signs with Yuasa Trading, and understanding these should be part of your investment process.

This note has only looked at a single factor that sheds light on the nature of Yuasa Trading's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.